Sunday, November 22, 2009

ONGOING COVERAGE: METROPOLITAN MORTGAGE BANKRUPTCY

Payout planned for Met investors

Checks will amount to 7 cents on dollar

John Stucke
Staff writer
July 22, 2006

Investors in defunct Metropolitan Mortgage & Securities Inc. will receive a small payout within about two months.

It's been a 2½-year wait for thousands of people, who could only watch as the Spokane financial conglomerate went bankrupt and became engulfed in a snarl of accounting scandals and lawsuits.

Maggie Lyons, who manages trusts set up for creditors, mailed a letter this week saying those holding Metropolitan debenture bonds should receive a check in September worth about 7 cents on the dollar. Those holding debenture bonds issued by Summit Securities Inc. will receive about 4 cents on the dollar.

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Lyons has had to postpone this initial distribution several times because of bankruptcy court actions and a legal fight with Western United Life Assurance Co., an insurance affiliate that was taken over and placed into receivership by Washington Insurance Commissioner Mike Kreidler in the wake of Metropolitan's bankruptcy.

Western was once considered the most valuable asset of Metropolitan, a financial backstop with equity of nearly $120 million. That net-worth number has steadily eroded and the most recent reports show Western United with capital and surplus of $32.9 million.

Kreidler has tried unsuccessfully to sell the insurance firm. Those attempts continue.

Lyons can only issue checks once in 2006, but she said the company anticipates making a second distribution in early 2007.

In all, Metropolitan hopes to make several disbursements during the next several years as it continues to sell assets, settle lawsuits and legal claims against former executives and family members, and possibly reap a big financial settlement from a pair of large outside accounting firms. Metropolitan has sued one of those firms and is in arbitration with the other.

It's a long-term strategy in what has turned out to be the largest bankruptcy in Spokane's history.

While the first payouts are nearing, Thomas Turner, the former president of Metropolitan Mortgage affiliate Summit Securities, is scheduled to be tried in April 2007 by a federal jury in U.S. District Court in Seattle. He faces a seven-count indictment of misleading the independent auditors of a publicly traded company.

Former CEO C. Paul Sandifur Jr. has not been charged with crimes, but he has been sued by the U.S. Securities & Exchange Commission for fraud, along with several other former executives.

More than 10,000 investors held $357.2 million in Metropolitan debt securities. Another 6,600 investors held $112.8 million in debt securities.